Legislature asks for program cuts despite soaring revenue

SALEM, Ore. (AP) — Legislative leaders in Oregon released a conservative budget framework asking for cuts across nearly all state programs, despite projections the state will take in historic levels of revenue.

Co-chairs of the Joint Committee on Ways and Means released their budget plan on Thursday, which is considered the starting point for the final budget package. The proposal calls for an approximate 5 percent reduction across all services except education and healthcare.

The plan also allocates an additional 1 percent to the state’s rainy day fund to prepare for a possible financial downturn in the next couple of years.

State economists indicate that Oregon has been benefitting from historic economic expansion, and that the state is expected to bring in $20.6 billion by the end of June, $147 million more than originally expected. But budget leaders are cautious, saying that revenue can go down in the upcoming months. Plus, they add that the revenue increase isn’t enough to address a spiraling pension debt and a Medicaid funding gap.

“We want to acknowledge that this is not a perfect budget, there will be folks who are not happy with this budget,” said Rep. Dan Rayfield, D-Corvallis, one of three co-chairs of the Ways and Means Committee. “But our job is to balance the budget within the resources we have.”

Notably, the budget proposal doesn’t include the $200 million increase for education requested by Democratic Gov. Kate Brown in her proposed budget unveiled in December. Lawmakers said they were able to scrounge up an extra $100 million through a tax on recreational marijuana and are proposing a $8.87 billion budget for state’s K-12 system. The Oregon School Boards Association has said that the school system needs $9.13 billion to maintain services and to account for increases in pension and other employee benefits.

“We recognize that this budget will still end up with deficits for many of our school districts,” said Sen. Elizabeth Steiner Hayward, D-Beaverton, another co-chair of the budgetary committee. “We don’t like it and yet we’re constrained to the resources we have available.”

Budget leaders also said that a large portion of the state’s budget will go toward funding the state’s Medicaid program. The state recently passed a $379 million healthcare package, but even that isn’t enough to make up for the state’s Medicaid funding gap that’s ballooned to over $800 million dollars. Lawmakers say they’ve received less federal matching funds than in years past, which has made that shortfall worse.

To ensure that the Medicaid program is fully funded without cuts to eligibity and benefits, Steiner Hayward said the committee had to siphon $350 million from the general fund. Gov. Brown has proposed paying the Medicaid debt through a tobacco tax increase and a tax on employers with a high percentage of employees on Medicaid, though none of those ideas have received a vote.

Budget leaders said their proposal differs from the governor because they only took into account current law and existing revenue, not potential funds from laws that have yet to be passed.

“This budget shows what is feasible given existing resources,” said co-chair and Sen. Betsy Johnson, D-Scappoose. “Economic forecasts suggest an impending economic downturn in the coming years, which further validates why we must be judicious when it comes to future spending.”

The budget plan is meant only to be a general framework for state agencies, and doesn’t spell out funding levels for specific agency services. Co-chairs said that the heads of subcommittees will be tasked with overseeing the budget process for specific agencies.

Lawmakers are expected to finalize and vote on a budget package by the end of June.

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Follow Sarah Zimmerman at @sarahzimm95

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